Vasudevan v Becon Constructions Australia Pty Ltd
[2013] VSC 748
•12 March 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2012 04361
IN THE MATTER of WULGURU RETAIL INVESTMENTS PTY LTD
(In Liquidation) (ACN 084 836 859)
B E T W E E N :
| DAVID RAJ VASUDEVAN & Ors (according to the attached schedule) | Plaintiffs |
| - and - | |
| BECON CONSTRUCTIONS (AUSTRALIA) PTY LTD (ACN 092 361 165) | First Defendant |
| OWENLAW MORTGAGE MANAGERS LTD (ACN 005 408 766) | Second Defendant |
ORDER
| JUDGE: | The Hon. Associate Justice Randall |
| DATE MADE: | 12 March 2013 |
| ORIGINATING PROCESS: | Filed 30 July 2012 |
| HOW OBTAINED: | At trial of the proceeding |
| ATTENDANCE: | Mr S. Maiden of Counsel for the plaintiffs. Mr A. Segal of Counsel for the first defendant. Mr W. Stark of Counsel for the second defendant |
| OTHER MATTERS: | Reasons delivered. Costs reasons are contained herein. |
| MEDIUM NEUTRAL CITATION: | [2013] VSC 748 |
ORDERS
THE COURT DECLARES THAT:
The deed dated 23 February 2011 between the third plaintiff, Becon and others and the mortgage between the third plaintiff and Becon dated 22 February 2011 and subsequently registered with the Queensland Land Registry as Dealing No. 7137311187 are each not void by reason of s 588FDA(1) of the Corporations Act 2001 (“the Act”).
THE COURT ORDERS THAT:
The application is dismissed.
Pursuant to s 479(3) of the Act:
(a) The liquidators are entitled to be paid from and as a first charge on, the net proceeds of sale of Lots 348 and 349 on Queensland Registered Plan 705928 (“the Lots”) currently held by the liquidators (“the fund”) all their remuneration, and be reimbursed from the fund all legal costs and other expenses incurred by them, in relation to:
(i)The sale of the lots;
(ii)The determination of to whom the fund should be distributed up to 29 July 2012;
(iii)Half the costs of preparing, filing and serving the originating process filed 30 July 2012; and
(iv) The costs of making, filing and serving the affidavit of Mr Vasudevan affirmed on 30 July 2012.
With all such costs calculated on an indemnity basis;
(b) The liquidators are justified in paying the remainder of the fund to Becon;
(c) In acting pursuant to directions (a) and (b), and, in particular as the second defendant concurs that an order ought to be made for the payment of the fund irrespective of the resolution of the order of priority vis-à-vis Becon and Owenlaw, the liquidators are acting consistently with the undertaking given by them to the defendants on 28 March 2012.
Pursuant to s 479(3) of the Act, the plaintiffs are not entitled to indemnify themselves from the fund held by them as stakeholder with respect to the order for costs made in paragraph 4 hereof and, for the avoidance of any doubt, with respect to any other remuneration costs or expense other than what is provided for in paragraph 2 of these orders.
The plaintiffs pay the first defendant’s costs of the proceeding including reserved costs.
Subject to determination of and deduction of the sums allowed in order 2 hereof, the balance of the fund be paid to the first defendant.
There be no order as to costs vis-à-vis the first defendant and the second defendant.
HIS HONOUR DELIVERED THE FOLLOWING REVISED JUDGMENT:
The company, Mr Thompson, a director of the company and Becon entered into a deed dated 23 February 2011. On 22 February 2011 the company executed and presumably gave to Becon on the 23rd if not 22 February 2011, a mortgage to secure the obligations under the deed. The liquidator seeks that each of the deed and the mortgage be declared void pursuant to s 588 FF1(h) by reason of each being an unreasonable director related transaction within the meaning of s 588FDA of the Act.
There's no doubt that the director, being the sole director of the company, received a benefit by virtue of the company entering into the deed and the mortgage. The liquidator contends that the deed and mortgage were caught by s 588FDA(1)(b)(iii) of the Act, and in that regard I refer to paragraph 17-19 of the plaintiff's submissions.
The plaintiffs submit that for the following reasons each transactions were both on behalf of and for the benefit of Mr Thompson. Section 9 of the Act defines "on behalf of" as including "on the instructions of". Mr Thompson was the sole director and secretary of Wulguru. He executed a Deed of Mortgage for Wulguru. The recitals to the deed record that it was accepted at the request of, inter alia, Mr Thompson. It follows that the deed and the mortgage entered pursuant to the deed could only have been entered on the instructions of and therefore on behalf of Mr Thompson.
As to the benefit, it's set out, "The benefit is given a broad meaning by s 9 of the Act which defines it relevantly as, "any benefit, whether by way of payment of cash or otherwise". The execution of each of the deed and the mortgage by Wulguru was a benefit to Mr Thompson because pursuant to clause 2 of the deed the execution of the mortgage obliged Becon to have its County Court proceeding against Mr Thompson struck out and was one of two preconditions leading to the release and discharge of Mr Thompson from his liability for Richmond's debts to Becon.
The construction contended for by the liquidator is that the words of sub-section (iii) should be construed without limitation or qualification and is sufficient to determine either; 1) Mr Thompson gave instructions; or 2) received a benefit. The liquidator submitted that Verge v Stinson 2011 18 WASC 158 was decided per incurium - that is, the Master did not have regard to the definition of s 9 of the Act and was somewhat wayward in dealing with direct and indirect benefit. I refer to paragraph 25 of the submission on behalf of the plaintiff.
It's common ground that Mr Thompson does not have any interest in Becon. He is not a director or shareholder and does not have any other financial interest. Becon is a third party arm's-length creditor.
Counsel for the parties agree that s 588FDA does not involve consideration of the notion of knowledge or Barnes v Addy type concepts, nor does it permit consideration of any good faith defence which might have been available to other claims open to the liquidator to prosecute under Part 5.7B of the Corporations Act. Part 5.7B is aimed at various circumstances where a transaction or a payment might be set aside; s 588FDA falls within that part.
It's fair to say that, in construing a statutory provision, the courts tend to place emphasis on a purposive construction, and that's reflected by s 115AA of the Acts Interpretation Act, the Corporations Act being a Commonwealth Act. It provides: "In the interpretation or provision of an Act a construction that would promote the purpose or object underlying the Act, whether that purpose or object is expressly stated in the Act or not, shall be preferred to a construction that would not promote the purpose or object."
Section 15AB of the Acts Interpretation Act provides:
Consideration may be given to extrinsic material if it's capable of assisting in the ascertaining of the meaning of a provision when the provision is ambiguous or obscure, or the ordinary meaning conveyed by the text taking into account the purpose and context leads to a result that is manifestly abound or unreasonable.
Extrinsic material may also be used to confirm that the meaning is the ordinary meaning conveyed by the text taking into account purpose and context. Extrinsic materials include Ministerial speeches and explanatory memoranda.
The construction contended for by the liquidators is that pursuant to (iii) s 88FDA is invoked where a payment, disposition or issue is made to a person (Becon in this case) on behalf of, including on the instructions of the director of the company - (I must add, Mr Maiden did not pursue that it included instructions by a close associate of the director in this context) - or secondly, the payment, disposition or issue is made to a person for the benefit of the director or the close associate. Mr Maiden submitted that the words should be given their ordinary meaning and not be restricted, limited or qualified in any way. I refer back to paragraph 18 of the submissions.
The submission was that the benefit included any benefit and such caught the benefits conferred upon Mr Thompson by the entering into of the deed and the mortgage. In effect, the forbearance and the ultimate possibility of a release from liability. As to Verge, Mr Maiden submitted that Sanderson M did not consider the definition set out in s 9 and, by using the analysis of the distinction between direct and indirect benefit, the Master did not turn his mind to the words set out in sub-section (iii).
There is force in that submission and it seems as though the Master may have been persuaded by the distinction between actual benefit and a derived benefit received by a person in the position of a shareholder of the recipient.
Mr Maiden also submitted that Warner, albeit by way of obiter, supported the concept that a court would be willing to unravel a transaction where there is an intervening third party, in this case Becon. That may be so, but his Honour treated the transaction in question as a single transaction where the director of the company disposing of the benefit ended up receiving the benefit. That is not the case here.
I construe s 588FDA(1)(b)(iii) firstly to expand the class of recipients caught by the section, not to define the nature of the transaction. Secondly, I construe the subsection to mean that the payment, disposition or issue received by Becon must be on behalf of or for the benefit of the director. That benefit, using the s 9 definition, refers to instructions given by the director to Becon, not to the company, that the holding by Becon must be for the benefit of Mr Thompson, the director, and not merely that a benefit was derived by the director from the transaction. I see no reason to embark upon the distinction between direct and indirect benefit as referred to by Sanderson M. It is sufficient to determine that Becon does not act upon the instructions of Mr Thompson and takes the mortgage for its own benefit.
I have come to those conclusions with regard to the intent of the legislation and to give effect to the same, and in that instance I refer to what has been set out in the plaintiff's submissions extracted from the explanatory memorandum:
The recipients covered are directors of the company and close associates of directors. It also includes a person where the transaction is made on behalf, of or for the benefit of, a director or close associate.
Then from the Second Reading Speech:
Also applies to transactions entered into with third parties, where they are made on behalf of, or for the benefit of, either a director or close associate. This will prevent people avoiding the new provisions through restructuring or redirecting transactions.
The transaction entered into by the company had the effect of putting out of reach of creditors of the company some of its assets. In other words, it had the effect of alienating property by making it the subject of a mortgage in favour of Becon which was not a creditor of the company at the time, but it cannot be said that the transaction was entered into for that purpose. It just happened to be an incident of it.
Further, the construction urged upon me by Mr Maiden could be considered absurd or unreasonable, and I don't say that unkindly, I have just picked up the words of the Acts Interpretation Act. By adopting that construction the potential reach of the section is to catch all transactions wherein instructions are given to the company either personally by a director or through the usual operation chain. The task the court would be then left to consider is if the transaction was unreasonable or not within the meaning of subsection (c) of 588FDA.
Secondly, the range of the section would be expanded to eliminate, in most instances, the need to pursue claims under the different regimes in Part 5.7B and has the direct effect of eliminating available defences which might otherwise be available to a creditor or recipient of the transaction.
That was not the intention of Parliament save in circumstances where it was the director or close associate of the director or a person or entity receiving on behalf of or for the benefit of the director. I use the words "behalf of or for the benefit" loosely without regard to the definition or the words of the section.
I determine that the deed and the mortgage, either alone or individually, are not caught by s 588FDA(1)(b)(iii). Accordingly, I dismiss the proceeding.
Proceeding
David Vasudevan and Andrew Yeo (“the liquidators”) were appointed as joint and several liquidators of Wulguru Retail Investments Pty Ltd (In Liquidation) (“the company”) by order of the court on 21 March 2012 in proceeding S CI 2012 908.
The company had entered into contracts of sale for lots 348 and 349 on RP705928, County of Elphinstone, Parish of Stewart in Queensland, dated 28 November 2011.
The first defendant (“Becon”) had registered mortgage number 713731187 on title and sought payment at the settlements of the balance of funds available to cover a debt exceeding $400,000.
The second defendant (“Owenlaw”) asserted that it had a debenture over the company and all its assets which had priority over the Becon mortgage. Becon disputed that assertion.
The liquidators wished to ensure that the funds from the settlements were properly distributed and accordingly sought for the same to be held in trust until the correct priority of payments was determined.
On 28 March 2012, the liquidators agreed and undertook to:
(i)Hold any amount received at the settlement of the contracts of sale (excluding the GST component of purchase prices) on trust (“settlement funds”);
(ii) Place the settlement funds in an interest bearing account; and
(iii) Only disburse the settlement funds upon:
(a)Written consent of Becon and Owenlaw evidencing that the liquidators, Becon and Owenlaw have reached agreement on the proper and lawful distribution of the funds, or;
(b) Court order.
The undertaking was given with the agreement of Owenlaw and Becon, and subsequently accepted by each.
By letter of 24 May 2012, the liquidators’ solicitors wrote to each of Owenlaw and Becon relevantly set out the following:
We are instructed that the [Becon] mortgage was provided by Wilguru as collateral security for a director related debt exceeding $400,000 and that Wulguru itself was not primarily liable for the debt secured by the [Becon] mortgage. On that basis, the act of Wulguru entering into the mortgage may be seen to be voidable by reason that it constitutes an uncommercial transaction pursuant to s 588FB of the Corporations Act…and/or an unreasonable director-related transaction pursuant to s 588FDA of the Act. At this stage, our clients reserve their rights. (Emphasis added).
Stakeholder
Our clients are confronted with competing claims by both Owenlaw and Becon. Both entities claim to be secured creditors and entitled absolutely to the Escrow amount. On 28 March 2012, our clients gave an undertaking to:
(a) Hold the Escrow amount on trust;
(b) Place the Escrow amount into an interest-bearing account; and
(c) Only distribute the Escrow amount upon the resolution by Owenlaw and Becon (emphasis added) of the competing claims (which must be evidenced in writing); or, by court order.
We advise that our clients are not prepared to allow their undertaking to be of indefinite duration and, in complying with their statutory obligations, seek to encourage a resolution of the competing claims on an expedited basis.
By the 24 May letter, the liquidators’ solicitors invited each of Owenlaw and Becon to attend an informal dispute resolution meeting on a without prejudice basis. There was then set out:
Our clients invite both Owenlaw and Becon… to attend an informal dispute resolution meeting on a without prejudice basis… Our clients are willing to assist the parties by acting as intermediaries or, if the parties think it will aid them, to arrange a mediator…
Please advise us whether each of you agree to attend within 14 days from the date of this letter. This court seems sensible to our clients. It seems to them that, given that pursuant to their undertaking they cannot release the funds without agreement or court order, the sooner the parties endeavour to reach agreement, the less time and expense is lost.
However, should you not respond within 14 days, or, should you not agree to attend the meeting, our clients will be left with no option but to commence proceedings seeking directions regarding the competing claims pursuant to s 479(4) of the Act. That section allows our client to bring this dispute before the court as a dispassionate stakeholder and obtain the judicial advice of the court as to what they should do, so as to insulate themselves from having to make a determination of law themselves (emphasis added).
The parties have agreed that I may refer to Becon’s position paper which was prepared for the informal dispute resolution meeting held on a without prejudice basis. The parties agreed that I may refer to the other correspondence produced by Becon even if it might have been produced in an attempt to negotiate a resolution of the issues between the parties or had been marked “without prejudice”. The position paper dealt solely with the issue of priorities which is consistent with the liquidators’ preference set out in the letter of 24 May 2012 wherein the liquidators encouraged each of Owenlaw and Becon to resolve their differences with the liquidators acting as intermediaries.
The issues between Becon and Owenlaw did not resolve at the informal dispute resolution meeting.
On 12 June 2012, Owenlaw solicitors wrote to each of the plaintiffs’ solicitors and Becon’s solicitors. That letter set out matters supporting the efficacy of the Owenlaw security. It then set out observations with respect to the Becon security. I refer to the following passages which occurred after a summary of what Owenlaw opined to be the position:
It is therefore our position that the granting of the mortgage is an uncommercial transaction and/or and unreasonable director/related transaction and clearly voidable pursuant to sections 588FE, 588FB and/or 588FDA.
Any action by the liquidator to void the mortgage will result in the recovery of an asset specifically covered by our clients’ security, we maintain that our clients’ security entitles it to receive the Escrow amount.
We also understand that Becon received the sum of $295,907.29 on 22 December 2011 in reliance on the same mortgage document at the settlement of the sale of another property of the company. It is our client’s position that those funds are also properly payable to our client.
The position then adopted by Owenlaw is somewhat opportunistic as it seeks a course adopted from the liquidator’s solicitor’s letter of 24 May 2012. The position is consistent with the position of Owenlaw during the course of this proceeding. Namely, that the mortgagee and deed be set aside so that there would be no claim by Becon on the stakeholders fund. Each of Owenlaw and the liquidators were content to proceed on the basis that once the Becon mortgage is set aside, provided the liquidators were satisfied that the amount secured by the Owenlaw charge had been appropriately proved, the fund would be disbursed to Owenlaw (presumably subject to any claim on the fund by the liquidators).
There then was an intercourse between the solicitors for the liquidators and the solicitors for Becon. The solicitors for Becon wrote two letters on 21 June 2012. The first was an open letter requiring payment of the fund in full to Becon. “The fund is not an asset of the company – there is therefore no basis for the liquidators to deduct their costs from the fund, other than possibly the direct cost of the property transaction.” On the same day, the solicitors for Becon sent a without prejudice letter in the form of a Calderbank offer.
The liquidators responded with a without prejudice letter which rejected Becon’s offer and relevantly set out:
It is noteworthy that your offer was not made to Owenlaw who has a competing interest in respect of the relevant funds.
Our client is not in a position to accept your client’s offer. …
On 20 July 2012, the liquidators’ solicitors wrote to the solicitors for Becon further setting out their position. That letter relevantly also includes:
Your client has sought payment to it of the full Escrow amount by virtue of the Becon mortgage. There has been no agreement by the parties that this should occur nor any court order obtained. Accordingly, the liquidators remain bound by their undertaking.
Having considered the deed and the Becon mortgage, and the circumstances surrounding the execution of those documents, our client considers that the deed and the Becon mortgage are unreasonable director-related transactions within the meaning of s 588FDA(1) and are voidable pursuant to s 588FE(6A)…
…
Accordingly, we are instructed to demand that your client relinquish any and all of its claim to the Escrow amount and pay to the liquidators the sum of $295,907.29, representing funds received by your client from the sale of 340-346 Stuart Drive, Wulguru, within seven days of the date of this letter.
If the above demands are not met, we are instructed to commence proceedings in the Supreme Court of Victoria seeking:
(i)Orders under s 588FF declaring the deed and mortgage void and for the repayment of that part of the proceeds of sale…in the sum of $295,907.29;
(ii)A direction as to the payment of the funds held in the Escrow account; and
(iii) Costs and interest.
On 30 July 2012, the Becon solicitors responded with a letter setting out a response to the liquidators’ solicitors. That response relevantly included:
As you point out in your letter, on 28 March 2012 the liquidators gave an undertaking that led to the establishment of the Escrow account. The undertaking was to hold the funds pending resolution of the priority dispute between Becon and Owenlaw, and to dispurse them only with the consent of Becon and Owenlaw, or court order. We accept that the liquidators require Owenlaw’s consent to dispurse the Escrow account. However, we understand that Owenlaw does not assert that it has priority over the Becon mortgage, given that the Becon mortgage was registered and therefore takes subject only to prior registered interest.
…
Accordingly, assuming Owenlaw’s consent, the liquidators must pay the fund to Becon. If Owenlaw does not consent, Becon will commence proceedings seeking orders for the payment of the Escrow account to it. This letter may be used on any question of costs.
The letter of 30 July 2012 was superseded or overtaken by the filing of the originating process on behalf of the liquidators on the same day.
The originating process seeks declarations with respect to the deed and mortgage that is each is void (although not specified) by reason of s 588FDA(1) of the Corporations Act 2001 (“the Act”). There is no paragraph 3 in the originating process. Paragraph 4 seeks an order under s 588FF(1)(c) that Becon pays to the liquidators the sum of $295,907.29. Paragraph 5 of the originating process seeks an order under s 588FF(1)(g) declaring that no debt arising under the deed may be proved in the winding up of the company.
There appears at paragraph 6:
The following directions under s 479(3) of the Act concerning the net proceeds of sale of Lots 348 and 349 on Queensland Registered Plan 705928 (the Lots) currently held by the liquidators (the fund)
(a)a direction that the liquidators are entitled to be paid from and as a first charge on the fund all their remuneration, and be reimbursed from the fund all expenses incurred by them, in relation to:
(i)the sale of the lots; and
(ii)the determination of to whom the funds should be distributed (including remuneration and expenses incurred in this proceeding).
(b)a direction as to how the liquidators are to deal with the remainder of the fund.
The plaintiffs’ counsel conceded that the orders sought in paragraph 6 were an adjunct to the relief sought in paragraphs 1-5.
Subsequently on 29 October 2012, a further letter which purported to be in the form of a Calderbank letter was sent by Becon’s solicitors to the plaintiff’s solicitors. Owenlaw’s solicitors were copied into the letter but the substance of the letter is not addressed to that firm. I make that observation even though the letter contains a reference to each party releasing the other from all claims relating to the originating process and that each party bear its own costs.
I determine that the offer contained in the letter of 29 October 2012 was not capable of being accepted by the liquidators alone either, by reason of the terms of the stakeholder undertaking dated 28 March 2012 requiring the agreement of Owenlaw before funds could be released or, perhaps, by virtue of the second defendant being a party to the originating process notwithstanding that no relief is sought against it and notwithstanding there is no issue in dispute in this originating process between Becon and Owenlaw.
In those circumstances, I determine that it was not reasonable for the liquidator to have accepted the offer contained in the letter of 29 October 2012 no matter how generous the terms of the same were.
Notwithstanding what was set out in the letter of 24 May 2012,[1] the proceeding is not brought as a stakeholder. It is primarily a proceeding filed by liquidators pursuant to their standing under Part 5.7B. Further, the application for directions which is co-joined to the primary relief sought is brought in the capacity as liquidators rather than as a stakeholder/trustee. The liquidators do not hold funds in the liquidation. The funds are held outside of the liquidation as stakeholder.
[1]See paragraph [8] hereof.
Owenlaw, by its counsel, consented to an order that the funds may be distributed without determining the priorities vis-à-vis Becon and Owenlaw. I was further informed by counsel for Owenlaw that Owenlaw could litigate the priority issue at any time whether the fund be held by the liquidators or be distributed.
But for the consent of the second defendant, I doubt that I would have had power to order a distribution of the fund pursuant to the orders sought on this originating motion without determining the priority question.
Costs
The plaintiffs have submitted with respect to costs:
The liquidators sued as trustees of the fund, and are therefore entitled to their costs out of the fund: rule 63.26, to be taxed on a solicitor and client basis: rule 63.33. Rule 63.26 and 63.33 create a principle similar to the rule of equity that a trustee is entitled to be recouped for everything that s/he has expended properly in his or her capacity as trustee… The equitable principle requires payment on an indemnity basis…
As the rules create a presumption that the liquidators will obtain their costs, the onus lies on Becon to convince the court to exercise its discretion otherwise.
Rule 63.26 is not qualified by the “reasonably, as well as honestly incurred” condition that qualifies the equitable right of indemnity explained in Adsett v Berlouis.
But even if the court’s discretion were governed by that condition, this would not be an appropriate case in which to deprive the liquidators of their right to costs as trustees. Becon does not allege that the liquidators acted dishonestly. The question is whether they acted reasonably. Trustees have a duty to determine to whom they should distribute the trust corpus… The liquidators were faced with two competing claims to the fund. They had undertaken to hold the fund on trust and not to distribute it without the written consent of both claimants or order of the court. The defendants never agreed on the distribution of the fund. The liquidators convened a mediation to resolve the competing claims, which failed. Becon stated that it would institute proceedings, but did not. Had the liquidators paid the fund to Becon (as Becon urged them to do) they would have breached the trust and the contractual obligations to both defendants. There being no agreement, to resolve the question of whether Owenlaw had entitlement to the fund, the application of s 588FF to the deed and the mortgage had to be determined. Only the liquidators could bring the proceeding necessary to test that question.
In those circumstances, it is unquestionably reasonable for the liquidators to commence proceedings to resolve the question of who was entitled to the fund; in fact, they had no alternative.[2]
[2]Paragraphs 6-10 of the plaintiffs’ outline regarding final orders and costs dated 26 February 2013.
As to the liquidators’ remuneration, the plaintiffs submitted after referring to the passage from a judgment of Finkelstein J in 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 at 385, as follows:
For the reasons set out above, the proceeding was a necessary step in determining to whom the fund was to be distributed. It follows that the liquidators’ remuneration connected with the proceeding is secured by their Universal Distributing lien.
The same result would be reached in the appropriate exercise at the court’s discretion under s 77 of the Trustee Act 1958 (Vic) or the court’s inherent jurisdiction to authorise the payment of remuneration to trustees…[3]
[3]Paragraphs 16-17 of the plaintiff’s outline.
I determine as follows:
(a)The liquidators held the fund solely in their capacity as stakeholder/trustee. The fund did not form part of the liquidation. The fund was held as two apparently secured creditors, the payment to either or both of whom may have extinguished the fund, were in dispute about the order of priorities.
(b)The proceeding was not a vehicle to determine the conflicting priorities.
(c) The proceeding was brought irrespective of any issue relating to the claims by each of Owenlaw and Becon.
(d)The sought orders did not directly affect the corpus of the fund although upon setting aside the deed and mortgage the amount already paid may have either augmented the fund or been appropriated into the liquidation. It cannot be posited that the liquidators were stakeholders in respect to that amount already paid.
(e)The liquidators have not chosen to pay the fund into Court pursuant to s 69 of the Trustee Act and to leave it to the competing parties to make claims upon any funds paid into court. The liquidators have not chosen to interplead (although that may not have been possible once the liquidators made claim on the fund pursuant to Part 5.7B).
The plaintiffs have maintained in submissions that they have come to court pursuant to s 479(4) of the Act. I repeat what I have set out in the quoted text of the letter of 24 May 2012 in paragraph 8 hereof. The distinction between the Corporations Act claim relying upon s 588FDA and an application for directions pursuant to s 479(4) of the Act was well appreciated by the plaintiffs’ solicitors on 24 May 2012. With respect to the former, the liquidators reserved their rights. With respect to the latter, the liquidators urged resolution of the priority issue to avoid the necessity of application to the court. Although I queried the application of s 479(4) of the Act, as the funds held by the liquidators were not held in the liquidation as such, I do not need to decide that issue. Notwithstanding the last observation, I reiterate that this is a Corporations Act claim brought by the liquidators in their capacity as liquidators. The claim includes relief un-related to the fund held as a stakeholder. It does not place before the court any material pertaining to the issue of priorities and does not seek any orders in relation to the same.
I will not speculate as to why the liquidators chose to file proceedings in the form set out in the originating process. The position of Owenlaw, and that of the liquidators, assuming success, is to the effect that once the funds were repaid the Owenlaw charge would be satisfied upon the amount being secured proven to the satisfaction of the liquidators.
Insofar as the originating process relates to the remuneration of liquidators, I determine:
(a)It was not reasonable for the liquidators to prosecute this proceeding under the guise of seeking directions from the court. This is more so as repayment of any amount or the application of the amount to the Owenlaw charge, after meeting the remuneration costs and expenses relating to the getting in and preservation of the fun may or may not have resulted in any return to ordinary unsecured creditors.
(b)It would have been reasonable to maintain the fund until after the determination of whether or not the mortgage constituted an uncommercial transaction as well as a director related transaction.
(c) It would have been reasonable to pay the stakeholder fund into court pursuant to the Trustee Act.
(d)The liquidators have elected not to seek directions or pay the funds into court and concede that the directions sought in the originating process (if at all valid – my observation) are an adjunct to what must be categorised as a curial proceeding seeking a determination under part 5.7B.
(e)In those circumstances, the liquidators are to be treated as any other ordinary litigant.
Given the concession by Becon’s counsel that the liquidators may be entitled to their remuneration and costs of the getting in and preservation of the fund, and given Owenlaw’s concession by its counsel that I am able to make orders for the disposition of the fund without determining the order of priorities, I make the following orders.
S C H E D U L E O F P A R T I E S
S CI 2012 04361
| B E T W E E N : | |
| DAVID RAJ VASUDEVAN (as Joint and Several Liquidator of WUGURU RETAIL INVESTMENTS PTY LTD | First Plaintiff |
| ANDREW REGINALD YEO (as Joint and Several Liquidator of WUGURU RETAIL INVESTMENTS PTY LTD | Second Plaintiff |
| WUGURU RETAIL INVESTMENTS PTY LTD | Third Plaintiff |
| - and - | |
| BECON CONSTRUCTIONS (AUSTRALIA) PTY LTD | First Defendant |
| OWENLAW MORTGAGE MANAGERS LTD (ACN 005 408 766) |
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